[Federal Register Volume 86, Number 8 (Wednesday, January 13, 2021)]
[Notices]
[Pages 2670-2673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00568]


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FEDERAL TRADE COMMISSION

[File No. 172 3092]


Tapjoy, Inc.; Analysis of Proposed Consent Order to Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices. The attached Analysis of Proposed Consent Order to Aid 
Public Comment describes both the allegations in the draft complaint 
and the terms of the consent order--embodied in the consent agreement--
that would settle these allegations.

DATES: Comments must be received on or before February 12, 2021.

ADDRESSES: Interested parties may file comments online or on paper by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Please write ``Tapjoy, Inc.; 
File No. 172 3092'' on your comment, and file your comment online at 
https://www.regulations.gov by following the instructions on the web-
based form. If you prefer to file your comment on paper, mail your 
comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Matthew H. Wernz (415-848-5125), 
Midwest Regional Office, John C. Kluczynski Federal Building, 230 South 
Dearborn Street, Suite 3030, Chicago, IL 60604.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
at https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before February 12, 
2021. Write ``Tapjoy, Inc.; File No. 172 3092'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the https://www.regulations.gov website.
    Due to the COVID-19 pandemic and the agency's heightened security 
screening, postal mail addressed to the Commission will be subject to 
delay. We strongly encourage you to submit your comments online through 
the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``Tapjoy, Inc.; 
File No. 172 3092'' on your comment and on the envelope, and mail your 
comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580; or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024. If possible, submit your paper comment to the Commission by 
courier or overnight service.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include sensitive 
personal information, such as your or anyone else's Social Security 
number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure your comment does not include 
sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including in particular competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the https://www.regulations.gov website--as legally

[[Page 2671]]

required by FTC Rule 4.9(b)--we cannot redact or remove your comment 
from that website, unless you submit a confidentiality request that 
meets the requirements for such treatment under FTC Rule 4.9(c), and 
the General Counsel grants that request.
    Visit the FTC website at http://www.ftc.gov to read this Notice and 
the news release describing the proposed settlement. The FTC Act and 
other laws that the Commission administers permit the collection of 
public comments to consider and use in this proceeding, as appropriate. 
The Commission will consider all timely and responsive public comments 
that it receives on or before February 12, 2021. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an agreement containing a consent order from Tapjoy, 
Inc. (``Tapjoy''). The proposed consent order has been placed on the 
public record for thirty (30) days for receipt of comments from 
interested persons. Comments received during this period will become 
part of the public record. After 30 days, the Commission will again 
review the agreement and the comments received, and will decide whether 
it should withdraw from the agreement and take appropriate action or 
make final the agreement's proposed order.
    Tapjoy operates an advertising platform within mobile gaming 
applications. On the platform, Tapjoy promotes offers of in-app rewards 
(e.g., virtual currency) to consumers who complete an action, such as 
taking a survey or otherwise engaging with third-party advertising. To 
induce consumers to engage with third-party advertisers, Tapjoy offers 
in-app rewards in the form of a specified amount of virtual currency 
that can be used in the in-app games. However, in many instances, 
Tapjoy never issued the promised reward to consumers who complete an 
action as instructed, or only issued the currency after a substantial 
delay. Consumers who attempt to contact Tapjoy to complain about 
missing rewards have found it difficult to do so, and even consumers 
who have been able to submit a complaint nevertheless did not receive 
the promised reward.
    The Commission's proposed complaint alleges that Tapjoy has 
violated Section 5 of the FTC Act. In particular, the proposed 
complaint alleges that Tapjoy has represented that consumers will 
receive a reward of virtual currency upon completion of a specific 
action when, in many instances, that representation was false, 
misleading, or not substantiated at the time the representation was 
made.
    The proposed order contains injunctive provisions addressing the 
alleged deceptive conduct. Part I.A of the proposed order prohibits 
Tapjoy from making the misrepresentations alleged in the complaint. 
Part I.B requires Tapjoy to make certain disclosures, specifically that 
its advertisers determine whether rewards are likely to issue, and when 
consumers are likely to receive rewards. Part I.C requires Tapjoy to 
obtain specified agreements from the associated advertiser before a 
reward is promoted or offered. Part I.D of the proposed order requires 
Tapjoy, before a reward is promoted or offered, to obtain the materials 
used to promote or offer the reward, to use those materials to attempt 
to obtain the reward, to validate the accuracy of those materials, and 
to validate that the reward is delivered promptly or that any delay is 
disclosed. Part I.E requires Tapjoy to provide a prominently disclosed 
and easy-to-use method by which consumers may submit support requests. 
Part I.F requires Tapjoy to investigate patterns of customer support 
requests or other information indicating that a particular promotion or 
offer of a reward has inaccurate instructions or is failing to deliver 
the reward.
    Parts II through V of the proposed order are reporting and 
compliance provisions. Part II requires acknowledgments of the order. 
Part III requires Tapjoy to notify the Commission of changes in 
corporate status and mandates that the company submit an initial 
compliance report to the Commission. Part IV requires the company to 
create certain documents relating to its compliance with the order for 
10 years and to retain those documents for a 5-year period. Part V 
mandates that the company make available to the Commission information 
or subsequent compliance reports, as requested.
    Finally, Part VI states that the proposed order will remain in 
effect for 20 years, with certain exceptions.
    The purpose of this analysis is to aid public comment on the 
proposed order. It is not intended to constitute an official 
interpretation of the complaint or proposed order, or to modify in any 
way the proposed order's terms.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.

Statement of Commissioner Rohit Chopra Joined by Commissioner Rebecca 
Kelly Slaughter Summary

     The explosive growth of mobile gaming has led to mounting 
concerns about harmful practices, including unlawful surveillance, dark 
patterns, and facilitation of fraud.
     Tapjoy's failure to properly police its mobile gaming 
advertising platform cheated developers and gamers out of promised 
compensation and rewards.
     The Commission must closely scrutinize today's gaming 
gatekeepers, including app stores and advertising middlemen, to prevent 
harm to developers and gamers.
    The video game business has solidified its place as a fixture of 
America's entertainment industry. During the pandemic, revenues in the 
sector have reportedly eclipsed those of the sports and film businesses 
combined.\1\ This period has brought about a massive increase in mobile 
gaming app installs and spending, cementing gaming as a major magnet 
for Americans' attention.\2\ The latest industry offerings rely on 
deeper social connectivity features and facilitate content creation by 
players. Americans are hosting birthday parties through gaming apps, 
and tens of millions have attended concerts by major artists on 
Fortnite and Roblox.\3\
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    \1\ Ben Gilbert, Video-game industry revenues grew so much 
during the pandemic that they reportedly exceeded sports and film 
combined, Business Insider (Dec. 23, 2020), https://www.businessinsider.com/video-game-industry-revenues-exceed-sports-and-film-combined-idc-2020-12.
    \2\ Robert Williams, Mobile gaming surges as pandemic drives 45% 
jump in app installs, Marketing Drive (Dec. 2, 2020), https://www.marketingdive.com/news/mobile-gaming-surges-as-pandemic-drives-45-jump-in-app-installs/591417/. Gaming expert Joost van Dreunen 
recently offered helpful analysis about emerging trends in this 
growing industry. The Prof G Show with Scott Galloway, Pandemic 
Learnings with Dr. Abdul El-Sayed (Dec. 15, 2020), https://westwoodonepodcasts.com/pods/the-prof-g-show-with-scott-galloway/.
    \3\ See, e.g., Gil Kaufman, Here's How Many People Tuned Into 
Lil Nas X's Roblox Show, Billboard (Nov. 17, 2020), https://www.billboard.com/articles/columns/hip-hop/9485495/lil-nas-x-roblox-show-viewers; see also Joost van Dreunen, The future is user-
generated, SuperJoost Playlist (Nov. 23, 2020), https://superjoost.substack.com/p/the-future-is-user-generated.
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    Mobile gaming is the fastest growing segment of the market, where 
revenues are primarily generated through in-app purchases and 
advertising. Importantly, this segment is characterized by a unique 
market structure dominated by new gatekeepers, particularly app stores

[[Page 2672]]

and advertising middlemen. This structure is rightfully under more 
intense scrutiny, given the challenges facing developers and the 
downstream practices that can harm gamers.
    Against this backdrop, the Federal Trade Commission evaluates an 
appropriate remedy to address conduct of Tapjoy, a mobile advertising 
platform that connects gamers, game developers, and advertisers. As 
detailed in the Commission's complaint, Tapjoy's practices allowed 
users to be cheated of promised rewards, and developers to be cheated 
of promised compensation. The proposed settlement does not remedy these 
past harms, but will require Tapjoy to better police its platform to 
prevent abuses going forward.\4\
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    \4\ This matter is another example where the lack of clarity 
regarding the scope of immunities conferred by Section 230 of the 
Communications Decency Act has given legal ammunition to platforms 
seeking to shirk responsibility for their commercial activity, 
including sales and advertising practices. This lack of clarity 
undermines the ability of the FTC and other regulators to obtain 
adequate monetary relief for misconduct.
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Tapjoy's Middleman Misconduct

    Tapjoy is a major mobile advertising platform that acts as a 
middleman between advertisers, gamers, and game developers. The 
platform woos developers into integrating its technology by promising 
payments for user activity. In a mobile gaming experience where 
developers use Tapjoy's advertising platform, Tapjoy displays 
``offers.'' When gamers complete these ``offers,'' such as by signing 
up for subscriptions or making purchases, Tapjoy credits the user's 
account with coins or other currency for use in the game, and 
developers receive a percentage of Tapjoy's advertising revenue.\5\
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    \5\ In other instances, users can receive rewards directly 
through the game.
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    However, according to the FTC's complaint, many players jumped 
through hoops--and even spent money and turned over sensitive data--to 
complete Tapjoy's offers, only to receive nothing in return.\6\ It 
appears Tapjoy amplified false offers by its business partners, who 
baited gamers with big rewards only to cheat them when it was time to 
pay up.\7\ Tapjoy did little to clean up the mess, even when hundreds 
of thousands of gamers filed complaints.\8\ This also harmed developers 
of mobile games, who were cheated of advertising revenue they were 
entitled to.
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    \6\ Compl. In the Matter of Tapjoy, Inc., ]] 21-29.
    \7\ Compl., id. ]] 8, 15-29.
    \8\ Compl., id. ]] 30-40.
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    In my view, Tapjoy's conduct violated the FTC Act's prohibition on 
unfair practices, as well as the prohibition on deceptive practices.\9\ 
The FTC's proposed settlement requires the platform to implement 
screening and testing procedures to weed out advertisers that cheat 
gamers and developers. This provision will help ensure Tapjoy takes 
more responsibility for fraud, rather than facilitating it.\10\
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    \9\ The Commission's proposed complaint charges Tapjoy with 
deception, but fails to include a charge of unfairness. However, the 
settlement includes injunctive relief that addresses Tapjoy's 
failure to police fraud.
    \10\ I respectfully disagree with the proposed order provision 
requiring Tapjoy to disclose that advertisers are responsible for 
issuing rewards. This disclaimer undermines the goal of ensuring 
that Tapjoy takes adequate responsibility for its business partners' 
practices.
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Gaming Gatekeepers and Trickle-Down Abuse

    Tapjoy is not the only platform squeezing developers. In fact, the 
firm is a minnow next to the gatekeeping whales of the mobile gaming 
industry, Apple and Google. By controlling the dominant app stores, 
these firms enjoy vast power to impose taxes and regulations on the 
mobile gaming industry, which was generating nearly $70 billion 
annually even before the pandemic.\11\
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    \11\ See Omer Kaplan, Mobile gaming is a $68.5 billion global 
business, and investors are buying in, TechCrunch (Aug. 22, 2019), 
https://techcrunch.com/2019/08/22/mobile-gaming-mints-money/.
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    We should all be concerned that gatekeepers can harm developers and 
squelch innovation. The clearest example is rent extraction: Apple and 
Google charge mobile app developers on their platforms up to 30 percent 
of sales, and even bar developers from trying to avoid this tax through 
offering alternative payment systems.\12\ While larger gaming companies 
are pursuing legal action against these practices, developers and small 
businesses risk severe retaliation for speaking up, including outright 
suspension from app stores--an effective death sentence.\13\
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    \12\ See Staff of H. Comm. On the Judiciary, 116th Cong., 
Investigation of Competition in Digital Markets: Majority Staff 
Report and Recommendations at 221 (Google); 339 (Apple). Although 
Google allows users to ``sideload'' apps from outside the Play 
Store, it has been alleged that Google makes this process 
``technically complex, confusing and threatening[.]'' Id. at 220 
(quoting Epic lawsuit).
    \13\ Developers have alleged retaliatory practices by both 
Google and Apple, such as when they have tried to circumvent these 
gatekeepers' preferred monetization tools. Id. at 222, 348-349.
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    This market structure also has cascading effects on gamers and 
consumers. Under heavy taxation by Apple and Google, developers have 
been forced to adopt alternative monetization models that rely on 
surveillance, manipulation, and other harmful practices.
    For example, many developers are turning to ``loot boxes'' to 
squeeze more revenue out of gamers. These loot boxes deploy dark 
patterns and other deceptions to lure gamers--often children--into 
purchasing in-app rewards of randomly assigned value, turning 
videogames into virtual casinos. As detailed in a recent FTC report, 
this addictive phenomenon emerged as a direct consequence of changing 
monetization models in the industry, as developers increasingly rely on 
recurring revenue, such as through in-app purchases, rather than 
upfront sales.\14\
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    \14\ Press Release, Fed. Trade Comm'n, FTC Staff Issue 
Perspective Paper on Video Game Loot Boxes Workshop (Aug. 14, 2020), 
https://www.ftc.gov/news-events/press-releases/2020/08/ftc-staff-issue-perspective-paper-video-game-loot-boxes-workshop.
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    Mobile gaming's market structure is also forcing developers to 
create revenue streams that are not subject to app store taxation, 
including through intrusive behavioral advertising. Last year, for 
example, the FTC brought an action against Hyperbeard, a developer of 
child-directed games charged with allowing major ad networks to surveil 
users--including children--in order to serve behavioral 
advertising.\15\ This type of conduct violates the Children's Online 
Privacy Protection Act, but Hyperbeard's surveillance practices are not 
unique. In fact, Google encourages game developers on its platform to 
adopt this monetization model, claiming ``users expect free games.'' 
\16\
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    \15\ Press Release, Fed. Trade Comm'n, Developer of Apps Popular 
with Children Agrees to Settle FTC Allegations It Illegally 
Collected Kids' Data without Parental Consent (June 4, 2020), 
https://www.ftc.gov/news-events/press-releases/2020/06/developer-apps-popular-children-agrees-settle-ftc-allegations-it.
    \16\ Mobile ads: the key to monetizing gaming apps, Google 
AdMob, https://admob.google.com/home/resources/monetize-mobile-game-with-ads/ (last visited on Jan. 5, 2021).
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    Today's action against Tapjoy reveals another monetization model 
developers turn to in the face of fees and restrictions imposed by app 
stores. By offering a platform connecting advertisers, gamers, and game 
developers, Tapjoy allows these developers to generate advertising 
revenue that Apple and Google do not tax. But this monetization model 
also creates opportunities for fraud, and the Commission's complaint 
details how Tapjoy allowed this fraud to fester.

Monitoring the Middlemen

    Developers of mobile games deliver creative content that keeps 
Americans entertained and engaged, but face many middlemen, even beyond 
the dominant

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app stores. Game developers relied on Tapjoy to generate revenue for 
themselves and offer gamers a way to earn currency to enhance their 
play. However, Tapjoy's failure to screen fraudulent offers left both 
gamers and developers holding the bag.
    The settlement proposed today should help reverse the lax policing 
practices that led hundreds of thousands of gamers to file complaints. 
But when it comes to addressing the deeper structural problems in this 
marketplace that threaten both gamers and developers, the Commission 
will need to use all of its tools--competition, consumer protection, 
and data protection--to combat middlemen mischief, including by the 
largest gaming gatekeepers.

[FR Doc. 2021-00568 Filed 1-12-21; 8:45 am]
BILLING CODE 6750-01-P